CEZ GROUP INTERIM CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS OF JUNE 30, 2014

Transcription

1 CEZ GROUP INTERIM CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS OF JUNE 30, 2014

2 CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2014 in CZK Millions Assets Property, plant equipment: June 30, 2014 December 31, 2013 (restated *) Plant in service 670, ,354 Less accumulated provision for depreciation (354,561) (340,888) Net plant in service 316, ,466 Nuclear fuel, at amortized cost 10,733 10,688 Construction work in progress 96,661 90,508 Total property, plant equipment 423, ,662 Other non-current assets: Investment in associates joint-ventures 13,174 12,999 Investments other financial assets, net 33,337 25,746 Intangible assets, net 20,656 20,701 Deferred tax assets Total other non-current assets 67,782 60,270 Current assets: Total non-current assets 491, ,932 Cash cash equivalents 37,681 25,003 Receivables, net 42,295 67,485 Income tax receivable 2,931 1,065 Materials supplies, net 8,868 8,054 Fossil fuel stocks 1,889 2,552 Emission rights 4,506 8,505 Other financial assets, net 42,105 38,400 Other current assets 3,162 3,398 Total current assets 143, ,462 Total assets 634, ,394 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the consolidated financial statements as of December 31, 2013 (see also Note 2.2.b). The accompanying notes are an integral part of these interim consolidated financial statements.

3 CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2014 Continued Equity liabilities Equity: Equity attributable to equity holders of the parent: June 30, 2014 December 31, 2013 (restated *) Stated capital 53,799 53,799 Treasury shares (4,382) (4,382) Retained earnings other reserves 205, ,659 Total equity attributable to equity holders of the parent 255, ,076 Non-controlling interests 4,441 4,690 Total equity 259, ,766 Long-term liabilities: Long-term debt, net of current portion (Note 6) 159, ,196 Accumulated provision for nuclear decommissioning fuel storage 43,783 43,827 Other long-term liabilities 25,685 26,840 Total long-term liabilities 228, ,863 Deferred tax liability 23,454 19,201 Current liabilities: Short-term loans (Note 7) 642 2,716 Current portion of long-term debt (Note 6) 31,610 28,104 Trade other payables 76,159 63,297 Income tax payable 457 1,719 Accrued liabilities 14,136 23,728 Total current liabilities 123, ,564 Total equity liabilities 634, ,394 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the consolidated financial statements as of December 31, 2013 (see also Note 2.2.b). The accompanying notes are an integral part of these interim consolidated financial statements.

4 CEZ GROUP CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2014 in CZK Millions Revenues: 1-6/ /2013 (restated *) The accompanying notes are an integral part of these interim consolidated financial statements. 4-6/ /2013 (restated *) Sales of electricity related services 86,538 94,387 42,790 45,666 Gains losses from electricity, coal gas derivative trading, net 3,456 4,823 1,291 1,975 Sales of gas, coal, heat other revenues 11,712 13,734 4,468 5,423 Total revenues 101, ,944 48,549 53,064 Operating expenses: Fuel (6,577) (6,791) (2,924) (2,916) Purchased power related services (38,342) (39,509) (18,631) (18,982) Repairs maintenance (1,794) (2,050) (1,047) (1,237) Depreciation amortization (13,774) (14,097) (6,911) (7,098) Impairment of plant, property equipment intangible assets including goodwill (Note 8) (2,095) (2) (2,083) 5 Salaries wages (8,984) (8,858) (4,625) (4,608) Materials supplies (2,229) (3,234) (1,211) (1,541) Emission rights, net 621 1, (452) Other operating expenses (4,434) (4,760) (2,097) (2,391) Total expenses (77,608) (77,803) (38,825) (39,220) Income before other income (expenses) income taxes 24,098 35,141 9,724 13,844 Other income (expenses): Interest on debt, net of capitalized interest (2,029) (2,282) (975) (1,135) Interest on nuclear other provisions (911) (901) (451) (451) Interest income Foreign exchange rate gains (losses), net (177) Gain (Loss) on sale loss of control of subsidiaries, associates joint-ventures - 1, Other income (expenses), net (192) Share of profit (loss) from associates joint ventures (78) (221) 165 (433) Total other income (expenses) (2,601) (616) (632) (868) Income before income taxes 21,497 34,525 9,092 12,976 Income taxes (4,256) (5,940) (1,759) (2,226) Net income 17,241 28,585 7,333 10,750 Net income attributable to: Equity holders of the parent 17,272 28,592 7,360 10,785 Non-controlling interests (31) (7) (27) (35) Net income per share attributable to equity holders of the parent (CZK per share) Basic Diluted Average number of shares outsting (000s) Basic 534, , , ,115 Diluted 534, , , ,115 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30, 2013 (see also Note 2.2.b).

5 CEZ GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2014 in CZK Millions 1-6/ /2013 (restated *) 4-6/ /2013 (restated *) Net income 17,241 28,585 7,333 10,750 Other comprehensive income - items that may be reclassified subsequently to income statement: Change in fair value of cash flow hedges recognized in equity 2,930 (672) Cash flow hedges removed from equity (790) (2,531) (387) (545) Change in fair value of available-for-sale financial assets recognized in equity (1,015) (486) 52 (365) Available-for-sale financial assets removed from equity (45) (25) (1) (4) Translation differences (851) Translation differences removed from equity Share on equity movements of associates jointventures (6) 96 (4) 11 Deferred tax relating to other comprehensive income (Note 9) (497) 706 (52) 128 Other comprehensive income, net of tax 1,280 (1,832) 560 (1,381) Total comprehensive income, net of tax 18,521 26,753 7,893 9,369 Total comprehensive income attributable to: Equity holders of the parent 18,548 26,629 7,917 9,374 Non-controlling interests (27) 124 (24) (5) * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30, 2013 (see also Note 2.2.b). The accompanying notes are an integral part of these interim consolidated financial statements.

6 CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2014 in CZK Millions Stated capital Treasury shares Attributable to equity holders of the parent Availablefor-sale Translation Cash flow hedge other difference reserve reserves Retained earnings Total Noncontrolling interests December 31, 2012, as previously reported 53,799 (4,382) (11,977) 1,506 1, , ,235 3, ,219 Effect of change in accounting method (Note 2.2.b) (5) - (326) (326) January 1, 2013 restated 53,799 (4,382) (11,977) 1,506 1, , ,235 3, ,893 Net income ,592 28,592 (7) 28,585 Other comprehensive income (2,595) (413) 96 (1,963) 131 (1,832) Total comprehensive income (2,595) (413) 28,688 26, ,753 Dividends (21,365) (21,365) (4) (21,369) Share options Transfer of forfeited share options within equity (56) Acquisition of a subsidiary Acquisition of non-controlling interests (13) (13) (14) (27) Loss of control of subsidiary ,341 1,341 Put options held by non-controlling interest (17) (17) 9 (8) June 30, 2013 (restated *) 53,799 (4,382) (11,028) (1,089) 1, , ,488 5, ,651 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30, 2013 (see also Note 2.2.b). Total equity The accompanying notes are an integral part of these interim consolidated financial statements.

7 CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2014 Continued Stated capital Treasury shares Attributable to equity holders of the parent Availablefor-sale Translation Cash flow hedge other difference reserve reserves Retained earnings Total Noncontrolling interests December 31, 2013 (restated *) 53,799 (4,382) (8,198) (8,671) 1, , ,076 4, ,766 Net income ,272 17,272 (31) 17,241 Other comprehensive income ,738 (1,155) (6) 1, ,280 Total comprehensive income ,738 (1,155) 17,266 18,548 (27) 18,521 Dividends (21,365) (21,365) (228) (21,593) Share options Transfer of forfeited share options within equity (24) Put options held by non-controlling interest (6) (6) 6 - June 30, ,799 (4,382) (7,499) (6,933) , ,265 4, ,706 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the consolidated financial statements as of December 31, 2013 (see also Note 2.2.b). Total equity The accompanying notes are an integral part of these interim consolidated financial statements.

8 CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2014 in CZK Millions Operating activities: 1-6/ /2013 (restated *) Income before income taxes 21,497 34,525 Adjustments to reconcile income before income taxes to net cash provided by operating activities: Depreciation, amortization asset write-offs 13,777 14,097 Amortization of nuclear fuel 1,717 1,449 Gain on fixed asset retirements, net (31) (1,904) Foreign exchange rate losses (gains), net (229) (21) Interest expense, interest income dividend income, net 851 1,199 Provision for nuclear decommissioning fuel storage (214) (130) Valuation allowances, other provisions other adjustments (1,972) (3,380) Share of (profit) loss from associates joint-ventures Changes in assets liabilities: Receivables 9,352 5,531 Materials supplies (827) (29) Fossil fuel stocks 662 1,591 Other current assets 1,048 (19,107) Trade other payables 455 4,636 Accrued liabilities (4,988) (2,559) Cash generated from operations 41,176 36,119 Income taxes paid (3,425) (4,907) Interest paid, net of capitalized interest (2,345) (2,530) Interest received Dividends received Investing activities: Net cash provided by operating activities 36,449 29,368 Acquisition of subsidiaries, associates joint-ventures, net of cash acquired - (975) Disposal of subsidiaries, associates joint-ventures, net of cash disposed of 27 (151) Additions to property, plant equipment other non-current assets, including capitalized interest (16,083) (21,261) Proceeds from sale of fixed assets 941 1,174 Loans made (6) (904) Repayment of loans Change in decommissioning other restricted funds (703) (716) Total cash used in investing activities (15,685) (22,203) * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30, 2013 (see also Note 2.2.b). The accompanying notes are an integral part of these interim consolidated financial statements.

9 CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2014 continued Financing activities: 1-6/ /2013 (restated *) Proceeds from borrowings 17,166 54,432 Payments of borrowings (25,162) (48,114) Proceeds from other long-term liabilities 58 1,327 Payments of other long-term liabilities (69) (123) Dividends paid to Company s shareholders (46) (39) (Dividends paid to) contributions received from non-controlling interests, net (5) (4) Total cash provided by financing activities (8,058) 7,479 Net effect of currency translation in cash (28) 52 Net increase in cash cash equivalents 12,678 14,596 Cash cash equivalents at beginning of period 25,003 17,955 Cash cash equivalents at end of period 37,681 32,551 Supplementary cash flow information Total cash paid for interest 4,991 4,487 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30, 2013 (see also Note 2.2.b). The accompanying notes are an integral part of these interim consolidated financial statements.

10 CEZ GROUP NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, The Company ČEZ, a. s. ( ČEZ or the Company ) is a Czech joint-stock company, owned 69.8% (70.3% of voting rights) at June 30, 2014 by the Czech Republic represented by the Ministry of Finance. The remaining shares of the Company are publicly held. The address of the Company's registered office is Duhová 2/1444, Praha 4, , Czech Republic. The Company is a parent company of the CEZ Group ( the Group ). Main business of the Group is the production, distribution, trade sale of electricity heat, trade sale of natural gas coal mining. 2. Summary of Significant Accounting Policies 2.1. Financial Statements The interim consolidated financial statements for the three months ended June 30, 2014 have been prepared in accordance with IAS 34 have not been audited by an independent auditor. The interim consolidated financial statements do not include all the information disclosures required in the annual financial statements, should be read in conjunction with the Group s annual financial statements as of December 31, Changes in Accounting Policies a. Adoption of New IFRS Stards in 2014 The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group s annual financial statements for the year ended December 31, 2013, except for as follows. The Group has adopted the following new or amended endorsed by EU IFRS IFRIC interpretations as of January 1, 2014: - IAS 28 Investments in Associate Joint Ventures (revised) - IAS 32 Financial Instruments: Presentation (Offsetting Financial Assets Financial Liabilities) - IAS 36 Impairment of Assets (Recoverable Amount Disclosure for Non-Financial Assets) - IAS 39 Financial Instruments: Recognition Measurement (Novation of Derivatives Continuation of Hedge Accounting) - IFRS 10 Consolidated Financial Statements - IFRS 11 Joint Arrangements - IFRS 12 Disclosure of Involvement with Other Entities - Investment Entities (Amendments to IFRS 10, IFRS 12, IAS 27 IAS 28) - IFRIC 21 Levies The impact of the adoption of stards or interpretations on the financial statements or performance of the Group is described below: IAS 28 Investments in Associate Joint Ventures (revised) As a consequence of the new IFRS 11 IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates Joint Ventures, describes the application of the equity method to investments in joint ventures in addition to associates. The amendment does not have a significant impact on the financial position or performance of the Group. The Group has already been applying the equity method for investments in joint ventures prior to the issue of this revised stard. IAS 32 Financial Instruments: Presentation (Offsetting Financial Assets Financial Liabilities) In December 2011, IASB issued an amendment to IAS 32, which is intended to clarify existing application issues relating to the offsetting rules reduce level of diversity in current practice. The amendment is effective for financial statements beginning on or after January 1, The amendments clarify that rights of set-off must not only be legally enforceable in the normal course of 1

11 business, but must also be enforceable in the event of default the event of bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity itself. The IAS 32 offsetting criteria require the reporting entity to intend either to settle on a net basis, or to realize the asset settle the liability simultaneously. The amendment clarifies that only gross settlement mechanisms with features that eliminate or result in insignificant credit liquidity risk that process receivables payables in a single settlement process or cycle would be, in effect, equivalent to net settlement, therefore, meet the net settlement criterion. The amendment had no impact on the Group s financial statements. IAS 36 Impairment of Assets (Recoverable Amount Disclosure for Non-Financial Assets) The amendment clarifies the disclosure requirements in respect of fair value less costs of disposal. The IASB eliminated unintended consequences caused by the original changes of IAS 36 added two disclosure requirements by this amendment: - Additional information about the fair value measurement of impaired assets when the recoverable amount is based on fair value less costs of disposal. - Information about the discount rates that have been used when the recoverable amount is based on fair value less costs of disposal using a present value technique. The amendment harmonizes disclosure requirements between value in use fair value less costs of disposal. The amendment is effective for financial statements beginning on or after January 1, The amendment had no impact on the Group s financial statements. IAS 39 Financial Instruments: Recognition Measurement (Novation of Derivatives Continuation of Hedge Accounting) The amendment provide an exception to the requirement to discontinue hedge accounting in certain circumstances in which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. The amendment covers novations: - That arise as a consequence of laws or regulations, or the introduction of laws or regulations - Where the parties to the hedging instrument agree that one or more clearing counterparties replace the original counterparty to become the new counterparty to each of the parties - That did not result in changes to the terms of the original derivative other than changes directly attributable to the change in counterparty to achieve clearing. All of the above criteria must be met to continue hedge accounting under this exception. The amendments cover novations to central counterparties, as well as to intermediaries such as clearing members, or clients of the latter that are themselves intermediaries. For novations that do not meet the criteria for the exception, entities have to assess the changes to the hedging instrument against the derecognition criteria for financial instruments the general conditions for continuation of hedge accounting. The amendment is effective for financial statements beginning on or after January 1, The amendment had no impact on the Group s financial statements. 2

12 IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation - Special Purpose Entities, which resulted in SIC-12 being withdrawn. IAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures, associates in separate financial statements. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 require management to exercise significant judgment to determine which entities are controlled, therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Control exists when an investor has: - Power over the investee (defined in IFRS 10 as when the investor has existing rights that give it the current ability to direct the relevant activities) - Exposure, or rights, to variable returns from its involvement with the investee - The ability to use its power over the investee to affect the amount of the investor s returns. This stard is effective for annual periods beginning on or after January 1, The endorsement process within EU adopted the stard decided that the stard should be applied, at the latest, as from the commencement date of a financial year starting on or after January 1, The stard did not have a direct impact on current Group s interests in other entities, but may affect the treatment of future acquisitions. IFRS 11 Joint Arrangements IFRS 11 replaced IAS 31 Interests in Joint Ventures SIC-13 Jointly-controlled Entities - Nonmonetary Contributions by Venturers. Joint control under IFRS 11 is defined as the contractually agreed sharing of control of an arrangement, which exists only when the decisions about the relevant activities require the unanimous consent of the parties sharing control. Control in joint control refers to the definition of control in IFRS 10. IFRS 11 also changes the accounting for joint arrangements by moving from three categories under IAS 31 to the following two categories: - Joint operation - An arrangement in which the parties with joint control have rights to the assets obligations for the liabilities relating to that arrangement. In respect of its interest in a joint operation, a joint operator must recognize all of its assets, liabilities, revenues expenses, including its relative share of jointly controlled assets, liabilities, revenue expenses. - Joint venture - An arrangement in which the parties with joint control have rights to the net assets of the arrangement. Joint ventures are accounted for using the equity method. The option in IAS 31 to account for joint ventures (as defined in IFRS 11) using proportionate consolidation has been removed. Under these new categories, the structure of the joint arrangement is not the only factor considered when classifying the joint arrangement as either a joint operation or a joint venture, which is a change from IAS 31. Under IFRS 11, parties are required to consider whether a separate vehicle exists, if so, the legal form of the separate vehicle, the contractual terms conditions, other facts circumstances. This stard becomes effective for annual periods beginning on or after January 1, The endorsement process within EU adopted the stard decided that the stard should be applied, at the latest, as from the commencement date of a financial year starting on or after January 1, The impact of the adoption of the stard IFRS 11 on the Group s financial statements is described in Note 2.2.b. IFRS 12 Disclosure of Involvement with Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 IAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates structured entities. Some of the more extensive qualitative quantitative disclosures of IFRS 12 include: provision of summarized financial information for each subsidiary with a material non-controlling interest; description of significant judgments used by management in determining control, joint control 3

13 significant influence, the type of joint arrangement (i.e. joint operation or joint venture); provision of summarized financial information for each individually material joint venture associate; description of the nature of the risks associated with an entity s interests in unconsolidated structured entities. This stard becomes effective for annual periods beginning on or after January 1, 2013 may affect the disclosures in the notes to financial statements. The endorsement process within EU adopted the stard decided that the stard should be applied, at the latest, as from the commencement date of a financial year starting on or after January 1, Investment Entities (Amendments to IFRS 10, IFRS 12, IAS 27 IAS 28) In October 2012 IASB issued the amendments that are effective for annual periods beginning on or after January 1, These amendments apply to investments in subsidiaries, joint ventures associates held by a reporting entity that meets the definition of an investment entity. An investment entity will account for its investments in subsidiaries, associates joint ventures at fair value through profit or loss in accordance with IFRS 9 (or IAS 39, as appropriate), except for investments in subsidiaries, associates joint ventures that provide services that relate only to the investment entity, which would be consolidated or accounted for using the equity method, respectively. An investment entity will measure its investment in another controlled investment entity at fair value. Noninvestment entity parents of investment entities will not be permitted to retain the fair value accounting that the investment entity subsidiary applies to its controlled investees. For non-investment entities, the existing option in IAS 28, to measure investments in associates joint ventures at fair value through profit or loss, will be retained. The stard had no effect on the consolidated financial statements as the parent company does not meet the definition of an investment entity. IFRIC 21 Levies The interpretation is applicable to all levies other than outflows that are within the scope of other stards (e.g. IAS 12) fines or other penalties for breaches of legislation. Levies are defined in the interpretation as outflows of resources embodying economic benefits imposed by government on entities in accordance with legislation. The interpretation clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability is recognized before the specified minimum threshold is reached. The interpretation does not address the accounting for the debit side of the transaction that arises from recognizing a liability to pay a levy. Entities look to other stards to decide whether the recognition of a liability to pay a levy would give rise to an asset or an expense under the relevant stards. The interpretation is effective for annual periods beginning on or after January 1, The new interpretation has no impact on the Group. 4

14 b. Impact of Adoption of IFRS 11 Joint Arrangements Based on the adoption of IFRS 11 Joint Arrangements indirectly also based on adoption of IFRS 10 Consolidated Financial Statements which defines control that is referred to in IFRS 11, the classification of company ČEZ Energo, s.r.o. was changed from the subsidiary to the joint venture resulting in the change of the consolidation method from full consolidation to equity method of accounting. This change was made based on detailed assessment of the company s articles of association after analysis of other contractual arrangements between the venturers. As required by IFRS 11 the change in the consolidation method of ČEZ Energo, s.r.o was done retrospectively certain previously reported figures as of June 30, 2013 December 31, 2013, were restated do not correspond to the interim consolidated financial statements as of June 30, 2013, to the consolidated financial statements as of December 31, 2013, respectively. The following tables summarize the effect of application of IFRS 11 to basic items of the consolidated financial statements of CEZ Group: December 31, 2013 as previously reported Effect of restatement December 31, 2013 restated Total property, plant equipment 426,560 (898) 425,662 Investment in associates joint-ventures 12, ,999 Total non-current assets 486,518 (586) 485,932 Cash cash equivalents 25,118 (115) 25,003 Total current assets 154,618 (156) 154,462 Total assets 641,136 (742) 640,394 Equity attributable to equity holders of the parent 258, ,076 Non-controlling interests 5,049 (359) 4,690 Long-term liabilities 239,071 (208) 238,863 Deferred tax liability 19,224 (23) 19,201 Total current liabilities 119,716 (152) 119,564 Total equity liabilities 641,136 (742) 640,394 5

15 1-6/2013 as previously reported Effect of restatement 1-6/2013 restated Total revenues 113,105 (161) 112,944 Total expenses (77,924) 121 (77,803) Income before other income (expenses) income taxes 35,181 (40) 35,141 Share of profit (loss) from associates joint-ventures (237) 16 (221) Total other income (expenses) (632) 16 (616) Income before income taxes 34,549 (24) 34,525 Net income 28,601 (16) 28,585 Net income attributable to: Equity holders of the parent 28,592-28,592 Non-controlling interests 9 (16) (7) EBITDA 49,249 (58) 49,191 Other comprehensive income, net of tax (1,832) - (1,832) Total comprehensive income, net of tax 26,769 (16) 26,753 Total comprehensive income attributable to: Equity holders of the parent 26, ,629 Non-controlling interests 141 (17) 124 Net cash provided by operating activities 29,490 (122) 29,368 Change in restricted financial assets (22,425) 122 (22,303) Total cash used in financing activities 7,479-7,479 Net increase in cash cash equivalents 14,596-14, Seasonality of Operations The seasonality within the segments Power Production Trading Distribution Sale usually takes effect in such a way that the revenues operating profits of these segments for the 1st 4th quarters of a calendar year are slightly higher than the revenues operating profits achieved in the remaining period. 6

16 4. Investments in Subsidiaries, Associates Joint-ventures The interim consolidated financial statements include the financial figures of ČEZ, a. s. the subsidiaries, associates joint-ventures listed in the following table: Subsidiaries Country of incorporation 7 % equity interest % voting interest December June 30, 31, June 30, 2014 December 31, 2013 Areál Třeboradice, a.s. Czech Republic 85.00% 85.00% 85.00% 85.00% A.E. Wind sp. z o.o. Pol 75.00% 75.00% % % Baltic Green I sp. z o.o. Pol 75.00% 75.00% % % Baltic Green II sp. z o.o. Pol 75.00% 75.00% % % Baltic Green III sp. z o.o. Pol 75.00% 75.00% % % Baltic Green IV sp. z o.o. Pol 75.00% 75.00% % % Baltic Green V sp. z o.o. Pol 75.00% % - Bara Group OOD Bulgaria % % % % Centrum výzkumu Řež s.r.o. Czech Republic 52.46% 52.46% % % CEZ Bosna i Hercegovina d.o.o. Bosnia Herzegovina % % % % CEZ Bulgaria EAD Bulgaria % % % % CEZ Bulgarian Investments B.V. Netherls % % % % CEZ Deutschl GmbH Germany % % % % CEZ Distributie S.A. Romania % % % % CEZ Elektro Bulgaria AD Bulgaria 67.00% 67.00% 67.00% 67.00% CEZ Finance Irel Ltd. Irel % % % % CEZ Hungary Ltd. Hungary % % % % CEZ Chorzow B.V. Netherls % % % % CEZ International Finance B.V. Netherls % % % % CEZ International Finance Irel Ltd. Irel % % % % CEZ MH B.V. Netherls % % % % CEZ Pol Distribution B.V. Netherls % % % % CEZ Polska sp. z o.o. Pol % % % % CEZ Produkty Energetyczne Polska sp. z o.o. Pol % % % % CEZ Razpredelenie Bulgaria AD Bulgaria 67.00% 67.00% 67.00% 67.00% CEZ Romania S.A. Romania % % % % CEZ RUS OOO Russia % % % % CEZ Shpërndarje Sh.A. Albania 76.00% 76.00% - - CEZ Silesia B.V. Netherls % % % % CEZ Slovensko, s.r.o. Slovakia % % % % CEZ Srbija d.o.o. Serbia % % % % CEZ Towarowy Dom Maklerski sp. z o.o. Pol % % % % CEZ Trade Albania Sh.P.K. Albania % % % % CEZ Trade Bulgaria EAD Bulgaria % % % % CEZ Trade Polska sp. z o.o. Pol % % % % CEZ Trade Romania S.R.L. Romania % % % % CEZ Ukraine LLC Ukraine % % % % CEZ Vanzare S.A. Romania % % % % ČEZ Bohunice a.s. Czech Republic % % % % ČEZ Distribuce, a. s. Czech Republic % % % % ČEZ Distribuční služby, s.r.o. Czech Republic % % % % ČEZ Energetické produkty, s.r.o. Czech Republic % % % % ČEZ Energetické služby, s.r.o. Czech Republic % % % % ČEZ ENERGOSERVIS spol. s r.o. Czech Republic % % % % ČEZ ICT Services, a. s. Czech Republic % % % % ČEZ Inženýring, s.r.o. Czech Republic % % -

17 Subsidiaries Country of incorporation % equity interest % voting interest December June 30, 31, June 30, 2014 December 31, 2013 ČEZ Korporátní služby, s.r.o. Czech Republic % % % % ČEZ Nová energetika, a.s. Czech Republic % % % % ČEZ Obnovitelné zdroje, s.r.o. Czech Republic % % % % ČEZ OZ uzavřený investiční fond a.s. Czech Republic % % % % ČEZ Prodej, s.r.o. Czech Republic % % % % ČEZ Teplárenská, a.s. Czech Republic % % % % ČEZ Zákaznické služby, s.r.o. Czech Republic % % % % ECO Etropol AD Bulgaria % % % % Eco-Wind Construction S.A. Pol 75.00% 75.00% 75.00% 75.00% Elektrárna Dětmarovice, a.s. Czech Republic % % % % Elektrárna Mělník III, a. s. Czech Republic % % % % Elektrárna Počerady, a.s. Czech Republic % % % % Elektrárna Tisová, a.s. Czech Republic % % % % Elektrociepłownia Chorzów ELCHO sp. z o.o. Pol % % % % Elektrownia Skawina S.A. Pol % % % % Elektrownie Wiatrowe Lubiechowo sp. z o.o. Pol 75.00% 75.00% % % Energetické centrum s.r.o. Czech Republic % % % % Energotrans, a.s. Czech Republic % % % % Farma Wiatrowa Leśce sp. z o.o. Pol 75.00% 75.00% % % Farma Wiatrowa Wilkolaz-Bychawa sp. z o.o. Pol 75.00% 75.00% % % Free Energy Project Oreshets EAD Bulgaria % % % % MARTIA a.s. Czech Republic % % % % Mega Energy sp. z o.o. Pol 75.00% 75.00% % % M.W. Team Invest S.R.L. Romania % % % % NERS d.o.o. Bosnia Herzegovina 51.00% 51.00% 51.00% 51.00% Ovidiu Development S.R.L. Romania % % % % PPC Úžín, a.s. Czech Republic % % % % PRODECO, a.s. Czech Republic % % % % Revitrans, a.s. Czech Republic % % % % SD - Kolejová doprava, a.s. Czech Republic % % % % SD - KOMES, a.s. Czech Republic % % % % Severočeské doly a.s. Czech Republic % % % % Shared Services Albania Sh.A. Albania % % % % ŠKODA PRAHA a.s. Czech Republic % % % % ŠKODA PRAHA Invest s.r.o. Czech Republic % % % % Taidana Limited Cyprus % % % % TEC Varna EAD Bulgaria % % % % Telco Pro Services, a. s. Czech Republic % % % % Tepelné hospodářství města Ústí nad Labem s.r.o. Czech Republic 55.83% 55.83% 55.83% 55.83% TMK Hydroenergy Power S.R.L. Romania % % % % Tomis Team S.R.L. Romania % % % % ÚJV Řež, a. s. Czech Republic 52.46% 52.46% 52.46% 52.46% 8

18 Associates joint-ventures Country of incorporation % equity interest % voting interest December June 30, 31, June 30, 2014 December 31, 2013 Akcez Enerji A.S. Turkey 50.00% 50.00% 50.00% 50.00% Aken B.V. in liquidation Netherls 37.36% 37.36% 50.00% 50.00% Akenerji Dogal Gaz Ithalat Ihracat ve Toptan Ticaret A.S. Turkey 37.36% 37.36% 50.00% 50.00% Akenerji Elektrik Enerjisi Ithalat Ihracat ve Toptan Ticaret A.S. Turkey 37.36% 37.36% 50.00% 50.00% Akenerji Elektrik Üretim A.S. Turkey 37.36% 37.36% 37.36% 37.36% Akkur Enerji Üretim Ticaret ve Sanayi A.S. Turkey 37.36% 37.36% 50.00% 50.00% AK-EL Kemah Elektrik Üretim ve Ticaret A.S. Turkey 37.36% 37.36% 50.00% 50.00% AK-EL Yalova Elektrik Üretim A.S. Turkey 37.36% 37.36% 50.00% 50.00% CM European Power International B.V. Netherls 50.00% 50.00% 50.00% 50.00% CM European Power Slovakia s.r.o. Slovakia 50.00% 50.00% 50.00% 50.00% ČEZ Energo, s.r.o. Czech Republic 50.10% 50.10% 50.10% 50.10% Egemer Elektrik Üretim A.S. Turkey 37.36% 37.36% 50.00% 50.00% Jadrová energetická spoločnosť Slovenska, a. s. Slovakia 49.00% 49.00% 50.00% 50.00% JESS Invest, s. r. o. Slovakia 49.00% 49.00% 50.00% 50.00% LOMY MOŘINA spol. s r.o. Czech Republic 51.05% 51.05% 50.00% 50.00% Mem Enerji Elektrik Üretim Sanayi ve Ticaret A.S. Turkey 37.36% 37.36% 50.00% 50.00% MOL - CEZ European Power Hungary Ltd. Hungary 50.00% 50.00% 50.00% 50.00% Sakarya Elektrik Dagitim A.S. Turkey 50.00% 50.00% 50.00% 50.00% Sakarya Elektrik Perakende Satis A.S. Turkey 50.00% 50.00% 50.00% 50.00% The equity interest represents effective ownership interest of the Group. 5. Equity On June 27, 2014 the Annual Shareholders Meeting of ČEZ, a. s. approved the dividends per share of CZK The total amount of dividend approved amounts to CZK 21,365 million. 9

19 6. Long-term Debt Long-term debt at June 30, 2014 December 31, 2013 is as follows (in CZK millions): June 30, 2014 December 31, % Eurobonds, due 2014 (EUR 600 million) 16,467 16, % Eurobonds, due 2038 (JPY 12,000 million) 2,371 2, % Zero Coupon Eurobonds, due 2038 (EUR 6 million) % Eurobonds, due 2015 (EUR 460 million) 1) 12,610 16, % Eurobonds, due 2039 (JPY 8,000 million) 1,582 1, % Eurobonds, due 2021 (EUR 750 million) 20,504 20,480 6M Euribor % Eurobonds, due 2019 (EUR 50 million) 1,366 1,364 3M Euribor % Eurobonds, due 2014 (EUR 150 million) - 4, % Eurobonds, due 2025 (EUR 750 million) 20,492 20, % Eurobonds, due 2020 (EUR 750 million) 20,414 20, % Eurobonds, due 2023 (JPY 11,500 million) 2,280 2, % Eurobonds, due 2023 (CZK 1,250 million) 1,248 1, % Eurobonds, due 2016 (EUR 340 million) 2) 9,295 13, %*IRp Eurobonds, due 2021 (EUR 100 million) 2,745 2, % Eurobonds, due 2021 (EUR 50 million) 1,368 1, % U.S. bonds, due 2022 (USD 700 million) 13,942 13,790 5,625% U.S. bonds, due 2042 (USD 300 million) 5,962 5, % Eurobonds, due 2042 (EUR 50 million) 1,344 1, % Eurobonds, due 2047 (EUR 50 million) 1,344 1, % Eurobonds, due 2047 (EUR 80 million) 2,196 2, % Eurobonds, due 2028 (EUR 500 million) 13,511 13, % registered bonds, due 2030 (EUR 40 million) 1,074 1, % registered bonds, due 2023 (EUR 40 million) 1,085 1, % registered bonds, due 2032 (EUR 40 million) 1,091 1, % registered bonds, due 2047 (EUR 61 million) 1,646 1, % registered bonds, due 2038 (EUR 30 million) % Debentures, due 2014 (CZK 2,500 million) 3) - 2,500 Exchangeable bonds, due 2017 (EUR million) 4) 12,345 - Total bonds debentures 169, ,913 Less: Current portion (29,077) (23,035) Bonds debentures, net of current portion 140, ,878 Long-term bank other loans: Total long-term bank other loans 21,488 25,387 Less: Current portion (2,533) (5,069) Long-term bank other loans, net of current portion 18,955 20,318 Total long-term debt 190, ,300 Less: Current portion (31,610) (28,104) Total long-term debt, net of current portion 159, ,196 1) 2) 3) 4) In April 2014, the original nominal value of the issue (EUR 600 million) was reduced by bought back own bonds at a nominal value of EUR 140 million. In April 2014, the original nominal value of the issue (EUR 500 million) was reduced by bought back own bonds at a nominal value of EUR 160 million. Since 2006 the interest rate has changed to consumer price index in the Czech Republic plus 4.20%. Exchangeable bonds due 2017 exchangeable for ordinary shares of MOL Hungarian Oil Gas PLC. 10

20 7. Short-term Loans Short-term loans at June 30, 2014 December 31, 2013 are as follows (in CZK millions): June 30, 2014 December 31, 2013 Short-term bank loans 141 1,965 Short-term debentures Bank overdrafts Total 642 2, Impairment of plant, property equipment intangible assets including goodwill At each reporting date, the Group assesses whether there is any indication that an asset may be impaired or that previously recognized impairment losses (except for goodwill) may no longer exist or may have decreased. The result of the assessment made at June 30, 2014 was that certain assets might have been impaired. In such case, the Group reviews the recoverable amounts of the assets to determine whether such amounts continue to exceed the assets carrying values. If not, the Group recognizes impairment loss directly in profit or loss in the line item of Impairment of plant, property equipment intangible assets including goodwill. The Group recognized for first six months ended June 30, 2014 the total amount of net impairment loss of CZK 2,095 million, out of which CZK 2,103 million is related to impairment of property, plant equipment of cash-generating unit Romanian wind power farms. This impairment was caused especially by new legislation of the construction tax in Romania with regard to drop in market prices of green certificates. The comprehensive analysis of the future development of the market of certificates will be prepared in the second half of Information about recognized impairment loss by operating segments is included in Note Income Taxes Tax effects relating to each component of other comprehensive income are the following (in CZK millions): Before tax amount 1-6/ /2013 Net of Before Tax tax tax Tax effect amount amount effect Net of tax amount Change in fair value of cash flow hedges recognized in equity 2,930 (552) 2,378 (672) 127 (545) Cash flow hedges removed from equity (790) 150 (640) (2,531) 481 (2,050) Change in fair value of available-for-sale financial assets recognized in equity (1,015) (106) (1,121) (486) 92 (394) Available-for-sale financial assets removed from equity (45) 11 (34) (25) 6 (19) Translation differences Translation differences removed from equity Share on equity movements of associates joint-ventures (6) - (6) Total 1,777 (497) 1,280 (2,538) 706 (1,832) 11

21 10. Segment Information The Group reports its result based on operating segments which are defined with respect to geographical location of the assets with similar economic environment characteristics, e.g. similar long-term average gross margins, similar nature of the products services with regard to regulatory environment. The Group has identified seven reportable segments on this basis: Power Production Trading / Central Europe Distribution Sale / Central Europe Mining / Central Europe Other / Central Europe Power Production Trading / South East Europe Distribution Sale / South East Europe Other / South East Europe The Group accounts for intersegment revenues transfers as if the revenues or transfers were to third parties, that is, at current market prices or where the regulation applies at regulated prices. The Group evaluates the performance of its segments based on earnings before interest, taxes, depreciation amortization (EBITDA). The reconciliation of EBITDA to income before other income (expenses) income taxes summarizes the following table (in CZK millions): 1-6/ /2013 Income before other income (expenses) income taxes 24,098 35,141 (EBIT) Depreciation amortization 13,774 14,097 Impairment of plant, property equipment intangible assets including goodwill 2,095 2 (Gain) loss on sale of property, plant equipment * (29) (49) EBITDA 39,938 49,191 * Item (Gain) loss on sale of property, plant equipment is presented in the statement of income as part of the line item Other operating expenses. 12

22 The following tables summarize segment information by operating segments for the six months ended June 30, 2014 at December 31, 2013 (in CZK millions): June 30, 2014: Power Production Trading CE Distribution Sale CE Mining CE Other CE Power Production Trading SEE Distribution Sale SEE Other SEE Combined Elimination Consolidated Sales other than intersegment sales 30,933 50,260 2,101 1, , , ,706 Intersegment sales 18,002 2,442 2,613 12, ,064 37,369 (37,369) - Total revenues 48,935 52,702 4,714 13,618 1,119 16,914 1, ,075 (37,369) 101,706 EBITDA 23,843 9,444 1,941 2, , ,949 (11) 39,938 Depreciation amortization (8,080) (1,891) (1,131) (1,094) (661) (881) (36) (13,774) - (13,774) Impairment of property, plant equipment intangible assets including goodwill (2,103) (19) - (2,095) - (2,095) EBIT 15,775 7, ,313 (2,126) ,109 (11) 24,098 Interest on debt provisions (2,840) (174) (116) (19) (287) (11) (13) (3,460) 520 (2,940) Interest income (520) 380 Share of profit (loss) from associates joint-ventures 92 - (1) - (317) (78) - (78) Income taxes (2,211) (1,373) (161) (291) (55) (165) (5) (4,261) 5 (4,256) Net income 25,402 6,009 1,225 1,027 (2,397) ,032 (14,791) 17,241 Identifiable assets 265,548 77,694 20,634 10,707 26,136 24, ,738 (2,306) 423,432 Investment in associates jointventures 5, ,892 3,022-13,174-13,174 Unallocated assets 198,045 Total assets 634,651 Additions to non-current assets 8,365 3, ,883 (29) 1, ,538 (5,624) 13,914 13

23 June 30, 2013 (restated *): Power Production Trading CE Distribution Sale CE Mining CE Other CE Power Production Trading SEE Distribution Sale SEE Other SEE Combined Elimination Consolidated Sales other than intersegment sales 34,966 57,679 2,343 1, , , ,944 Intersegment sales 21,755 1,778 3,382 18, ,088 48,068 (48,068) - Total revenues 56,721 59,457 5,725 20,117 1,367 16,530 1, ,012 (48,068) 112,944 EBITDA 29,263 10,663 2,815 2,783 1,995 1, , ,191 Depreciation amortization (8,282) (1,855) (1,247) (1,047) (724) (908) (34) (14,097) - (14,097) Impairment of property, plant equipment intangible assets including goodwill (8) - (2) - (2) EBIT 20,986 8,812 1,572 1,765 1, , ,141 Interest on debt provisions (3,098) (198) (122) (14) (300) (14) (30) (3,776) 593 (3,183) Interest income 1, ,332 (593) 739 Gain from loss of control ,785-1,785-1,785 Share of profit (loss) from associates joint-ventures (174) (87) - (221) - (221) Income taxes (3,440) (1,457) (302) (394) (142) (175) (4) (5,914) (26) (5,940) Net income 25,643 7,176 1,713 1, , ,414 (9,829) 28,585 Additions to non-current assets 12,264 3, , , ,504 (9,684) 18,820 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the interim consolidated financial statements as of June 30,

24 December 31, 2013 (restated *): Power Production Trading CE Distribution Sale CE Mining CE Other CE Power Production Trading SEE Distribution Sale SEE Other SEE Combined Elimination Consolidated Identifiable assets 266,637 76,444 20,962 11,066 28,405 24, ,147 (2,485) 425,662 Investment in associates jointventures 4, ,022 2,812-12,999-12,999 Unallocated assets 201,733 Total assets 640,394 * Certain numbers shown were restated due to change in the consolidation method of company ČEZ Energo, s.r.o. do not correspond to the consolidated financial statements as of December 31, 2013 (see also Note 2.2.b). 15

25 11. Events after the Balance Sheet Date On July 21, 2014 the Group signed loan facility agreement with European Investment Bank amounting up to EUR 200 million to support financing of investments into reinforcement development of distribution grid in the Czech Republic. 16